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1. HUD Partners.
2. Multifamily Housing - Section 8 Contract Renewal Options

Section 8 Contract Renewal Options

Welcome to the Section 8 Housing Assistance Payment Contract Renewal Options web page. This resource consists of descriptions of alternatives offered to owners of Section 8 HAP-assisted residential or commercial properties who want to renew their HAP agreements. The info provided here is not extensive and rather is intended to help owners browse the choices readily available to them. For full directions and requirements for renewal of a HAP agreement, please refer to the Section 8 Renewal Policy Guide.

For particular concern about a task's eligibility to restore a HAP contract, please call your local HUD Multifamily Account Executive.

Option 1: Mark up to Market

Eligibility: This alternative is readily available to owners whose contract rents are below equivalent market rents as identified by a lease comparability study. An owner may ask for that their qualified current HAP agreement be terminated and restored under this choice.

Term: Between 5 and twenty years.

Renewal Rent Increase: At HAP renewal, rents are set at market comparable levels, as determined by an owner's RCS. Rents are topped at 150% of Fair Market Rents unless the owner fulfills certain criteria to certify under the discretionary criteria explained at Section 9-3.

Forms and files for Option 1:

Worksheets for Mark-up-to-Market.
Blank worksheets as PDF files

Sample worksheets as PDF files

Worksheets as Microsoft Excel files

Option 2: Increase to Budget

Eligibility: This option is offered to owners whose agreement leas are listed below or equivalent to similar market rents. An owner might decrease their rents to market levels to participate under Option 2.

Renewal Rent Increase: At HAP renewal, rents are set at a level needed to support a HUD-approved task budget. These rents might not exceed market equivalent levels, as shown by a lease comparability study.

Comparability Adjustment: At each fifth year anniversary of the HAP agreement renewal, the agreement leas are adapted to existing market levels. The owner needs to send a rent comparability study which is utilized to set the leas on the 5th, 10th, and 15th anniversaries of the HAP agreement.

Forms and documents for Option 2:

Section 8 Renewal Policy Guidebook: Chapter 4, Chapter 9

Option 3: Mark-to-Market

Eligibility: This option is offered to specific tasks whose leas go beyond market comparable levels as determined by a lease comparability research study. Typically, this uses to projects whose mortgages are guaranteed by the Federal Housing Administration. Congress gave HUD the authority to restructure an owner's mortgage so that debt service is decreased to a level that can be supported by market similar levels. If projects can

Term: twenty years.

Annual Rent Increase: At HAP renewal, rents are minimized to a market similar level as shown by a rent comparability research study.

Mortgage Restructuring: The owner may ask for that their eligible mortgage be reorganized into a primary mortgage and secondary debt. The new primary mortgage will be sized so that market comparable rents are enough to support the financial obligation service on that mortgage. Use limitations will remain in location at the residential or commercial property so long as the secondary financial obligation balance stays. If the task can remain financially feasible in spite of a rent reduction to market levels, then no mortgage restructuring may be needed.

More Information for Option 3: Information about Option 3 can be discovered on the About Mark-to-Market website. All questions regarding a HAP renewal under Option 3 must be directed to m2minfo@hud.gov.

Option 4: Exception Projects

Eligibility: This option is offered to jobs which are exempt from restructuring under MAHRA. This usually means that the project is not subject to an FHA-insured mortgage, but instead has a standard mortgage or is tax-credit financed.

Term: Between 1 and 20 years.

Rent Increase: At HAP renewal, rents are either changed by the Operating Cost Adjustment Factor or by a HUD-approved budget (capped by market leas as figured out by a Rent Comparability Study), whichever is lower.

Annual Rent Adjustment: The contract leas will be changed up each year by the Operating expense Adjustment Factor published for the area. This multiplicative rent change is released by HUD in October of each year and is reliable in February of the list below year. The OCAF is based upon a variety of market indications and is meant to catch the effects of inflation and other market aspects on the cost of operating rental housing.

Forms and documents for Option 4:

Section 8 Renewal Policy Guidebook, Chapter 6

Option 5: Preservation Projects

Eligibility: Certain jobs based on a long-term HUD use agreement are required to restore under this Option. This usually includes projects with a Portfolio Reengineering Demonstration Use Agreement, an ELIHPA Use Agreement, or a LIHPRHA Use Agreement.

Term: Varies depending on HAP agreement requirements.

Rent Increase at HAP Renewal: The rents upon HAP renewal depend on each project's particular HAP contract, Use Agreement and, if suitable, Strategy. Please examine those files and call your HUD Account Executive with concerns concerning alternatives for your residential or commercial property.

Annual Rent Adjustment: Which rent adjustment systems are available to your project differ depending on the HAP contract, Use Agreement, and Plan of Action. Please evaluate those files and contact your HUD Account Executive with questions concerning alternatives for your residential or commercial property. Many Preservation projects might ask for a budget-based rent increase to assist with unanticipated situations at a residential or commercial property or to deal with physical conditions requires.

Forms and files for Option 5:

- The task's Use Agreement ought to be reviewed to figure out HAP renewal alternatives.

HAP Renewal Request Form (HUD-9624)

HUD Handbook 4350.1 Chapter 7: Processing Budgeted Rent Increases

OCAF Adjustment Worksheet (HUD-9625)

Section 8 Renewal Policy Guidebook, Chapter 7

Option 6: Opt-out

Eligibility: An owner might choose to not restore their HAP agreement upon expiration. This does not apply to owners based on a legal obligation to restore the HAP contract resulting from an Usage Agreement that is attached to the residential or commercial property.

An owner should supply HUD and tenants notification of the opt-out one year prior to expiration of the HAP agreement. Upon expiration, qualified renters will be provided boosted vouchers pursuant to 42 U.S.C. § 1437f( t).

Full HUD requirements for an owner who wishes to pull out of restoring their HAP contract can be found at Chapter 8 of the Section 8 Renewal Policy Guide. Please keep in mind that state and local laws might impact an owner's capability to opt-out of restoring their HAP contract. These requirements would not appear in the Section 8 Renewal Policy Guide and HUD can not recommend an owner of their obligations under these laws.

If you are planning to choose out of HAP agreement renewal, please evaluate the 8( bb) Preservation Tool. This program allows HUD to guarantee that budget-friendly housing remains available in your neighborhood even if you do not wish to renew your HAP agreement.

Forms and documents for Option 6:

HAP Renewal Request Form (HUD-9624)

Enhanced Voucher Fact Sheet

Section 8 Renewal Policy Guidebook, Chapter 8

Section 8 Preservation Efforts

Eligibility: An owner who is eligible to restore their HAP contract under Option 1 or 2 may likewise take part in the Section 8 Preservation Efforts programs explained in Chapter 15 of the Section 8 Renewal Policy Guide. The Transfer program supplies incentives for the project of a HAP agreement to a not-for-profit, mission-oriented owner. The Capital Repairs program ensures that the HAP renewal These programs supply a range of advantages to owners who want to guarantee long-lasting conservation of the housing support at their residential or commercial property.